Silicon Valley Daze

by pessimist

High-tech used to be one of the highest paying employment sectors in the American economy. But things have fallen on hard times, mostly due to poor management by the participants. The following article exposes the juvenile personality of the most successful of these:

When the Microsoft chairman and his chief executive, Steve Ballmer, played a game onstage at the Consumer Electronics Show (CES) in Las Vegas last week recreating the classic fight of Muhammad Ali against George Foreman, it was Gates (as Ali) who won, and Ballmer who threw his controller to the floor.

Gates lost this next one also - what's he going to throw this time when he finds out his pet browser isn't considered important?

How bad is Microsoft's standing in the world of Internet search engines? Bad enough that MSN Search wasn't even mentioned by the French president when he listed the "American giants" competing with France's tech industry.

"We must meet the global challenge of the American giants Google and Yahoo!," Jacques Chirac said, according to The Associated Press. "Today the new geography of knowledge and cultures is being drawn. Tomorrow, that which is not available online runs the risk of being invisible to the world," the French president said.

Chirac then discussed a European response to Google — — a multimedia search engine called Quaero being developed by a European consortium including French electronics company Thomson, France Telecom and Deutsche Telekom. Some suggested the Quaero-Google rivalry could emerge as the online equivalent of the Airbus-Boeing competition. But that marginalizes Microsoft's search efforts even further.

The bad news for Google is that its cafeteria will have to start serving Freedom Fries.

That wasn't the only loss Bill Gates faced! A long-running war against hackers and crackers continues.

At a conference in Washington DC, Gates' enemies are plottijng further mischief:

A dangerous wireless security problem has been exposed in most laptops running a recent version of Windows at ShmooCon, the hacker conference held in Washington DC.

Mark Loveless, of Vernier Threat Labs, explained how on aeroplane flights he exploited the vulnerability to access other passengers' Windows-based laptops.

The laptop must be running Windows XP or 2000, have built-in wireless functionality and be unprotected by firewall software.

The flaw is based on how the operating system is configured to search for any available wireless connection when the laptop is started up. If no wireless link is found, Windows creates an ad-hoc "local link address", instead of a "private network".

The address becomes associated with the name of the last wireless network that provided the user with a real web address. Windows then causes the laptop to broadcast that network name to other computers in close range of the machine.

By creating a network connection on his laptop that matches the network name being broadcast by the target machine, the two laptops could communicate with each other on the same local link address. And the hacker effectively gets control of your laptop.

Although Microsoft has acknowledged the flaw and is to change the standard configuration in further Windows service packs, there are ways to protect your laptop.

A report released on Sunday said the Silicon Valley region added new jobs in 2005 for the first time in four years, ...

While the number of new jobs - 2,000 - was modest, the data suggested that the "jobless" economic recovery of the last two years in Silicon Valley may be evolving into one that creates jobs as well as revenue. The report, issued by Joint Venture Silicon Valley, a nonprofit organization, found that Silicon Valley companies employed 1.15 million people in 2005, a 0.2 percent gain over the previous year.

Damn! Cancel that unemployment application!

The employment figure is still substantially lower than the number of people employed in the region in 2000, at the height of the dot-com bubble, but Russell Hancock, president and chief executive of the organization, based in San Jose, Calif., said comparing the two periods was unrealistic. "You're never going to see the kind of job creation that you did during the dot-com boom," he said. "That was Silicon Valley's job factory overheating. It wasn't real."

This is what was real:

During the dot-com era, Silicon Valley gained 350,000 new jobs, only to lose 200,000 of them in the early 2000's.

So - is the information in this next comment real?

As they have struggled to grow in recent years, technology companies have learned to make do with fewer people, said Stephen Levy, director of the Center for Continuing Study of the California Economy, an economic research organization. He said the region's job numbers were not anywhere near the employment levels that existed even before the boom and were not likely to reach that level.

"Production is up, sales are up, and all that can exist without job growth," Mr. Levy said.

0.2% isn't job growth! So why the happy talk?

The report, which is issued annually, said most of the new jobs were high-end positions. "They are particular kinds of jobs - creative and knowledge-intensive," Mr. Hancock said.

Aat least hancock is honest enough to admit that all isn't hearts and flowers:

In the Joint Venture report, Mr. Hancock wrote, "Not everyone is benefiting from the changes we're experiencing, and too many of us are unprepared to participate in a more demanding economy."

Gee - now why would that be? Do you think that all of those who would have been educated enough to take these jobs are still in the area? I have a neighbor who used to live there. He moved when he lost his job up there - and took a huge hit in his lifestyle as well. he was hardly alone!

So the only solution is to educate replacements. The only problem - besides the low number of new jobs - is that the area isn't into learning anymore, if this information is correct:

The challenge for Silicon Valley now is to provide the training and education necessary to ensure that it has workers who are prepared for new jobs. Graduation rates among high school students in the region declined in 2005, and disparities persist among ethnic groups.

I guess resident foreigners are the only likely candidates for these jobs:

Legal immigration rose 56 percent in Silicon Valley in 2005, compared with 2004, more than three times the increase for the United States as a whole. While the overall population of Silicon Valley grew by less than 1 percent in 2005, that was the largest increase since 2000, the report said.

"We have repositioned ourselves in a fiercely competitive global economy," said Joint Venture president Russell Hancock in an advance look at a report that will be formally released Friday. "Creativity is the key word."

[T]he hope is that it will maintain its pre-eminence by creating fewer, super-productive jobs -- although this runs the risk of causing a sort of regional gentrification that is making it tougher for families of modest means to live in the area.

The report, "2006 Silicon Valley Index," ... notes that, from kindergarten to community college, regional schools will be hard-pressed to prepare local children for the increasingly lofty jobs of Silicon Valley 2.0.

"We are shifting from an economy that is industrially focused to one that relies on creativity for the consumer," said Mountain View economist Doug Henton, principal author of the report. He cited the iPod as the sort of hit Silicon Valley is uniquely positioned to create thanks to the talent available here.

Henton's case for a regional rebound flies in the face of one cold, hard fact:

Payroll employment in the valley -- 1.154 million when the survey ended in the second quarter of 2005 -- is down 217,000 from the same period in 2001, when the job count was at its highest.

[M]ost of those jobs were lost in manufacturing or in routine software or engineering disciplines that can now be done in less expensive locales, Henton said.

Could those 'less expensive locales' be .... India and China????

To support the notion of a valley renaissance, he noted that payrolls remain strong in software, biotechnology and most importantly in a new industry grouping that Joint Venture calls "creative and innovation services."

But Joint Venture tempered its optimism by raising social issues beyond perennial complaints about housing costs and transit woes. Noting that "many households are feeling the economic squeeze," the report says:

"Many companies have grown their revenues and achieved record productivity, but they haven't added to the region's job count -- choosing in some cases, to outsource work to lower-cost locations."

So much for all the happy talk!

San Mateo County Manager John Maltbie is a member of the Joint Venture board and has seen the valley rise and fall since he took his post in 1989. This bounce-back is different, Maltbie said, because while many companies have emerged stronger, jobs have not returned in sufficient number. "Yes, we are creating these higher-end jobs, but of necessity there are fewer of them," he said.

"I liken it to climbing a pyramid. There are fewer and fewer opportunities the closer you get to the top."

For the rest, slipping into homelessness is getting too close for comfort:

Some indicators hint at sliding fortunes in the general populace. Joint Venture said the median household income for Santa Clara County was $84,987 in 2004. That was $138 lower than the median of $85,125 in 1994, after adjusting for inflation.

Despite big increases in regional productivity, median household income has actually lost ground.

Another happy talking point dulls on examination!

The report also noted a drop in health insurance coverage in the region between 2001 and 2003, the most recent years for which such data are available. The share of residents covered by employer-based insurance declined 7.5 percent during the period. The percentage of the uninsured rose to 10.9 percent from 9.3 percent in 2001.

Don't get sick and need long term care! Besides not being covered, your job will go to someone else.

But I digress.

Teachers I know tell me that they spend so much time teaching to the test to meet the mandates of "No Education Tax Dollar Left Uncut" that there isn't any time to teach anything. How are they going to meet this challenge?

Turning to how the educational system is preparing today's youngsters for tomorrow's knowledge-based jobs, the report offers some lessons for parents: If children are not reading at third-grade level by the time they reach third grade, they're likely to continue falling behind. If they're not taking intermediate algebra by 10th or 11th grade, they may miss one of the "gateway skills" needed to further their education -- and job prospects.

Fewer new jobs, lower pay, higher hiring requirements, the education process interfered for political reasons, no insurance, more competition for work ... what else could go wrong?

The picture that emerges from the report suggests a region re-emerging as the concept capital of the planet, creating fewer but highly skilled jobs. "The gentrification point is very real, and we have to consider it," said Henton, the Joint Venture economist, adding a question implicit in the report: "Does everyone have an opportunity to participate in this creativity economy?"

No.

This will put pressure on many households to keep pace with the cost of living, while raising questions about whether enough locals will be qualified for the jobs that are available.

(The report will be released at a State of the Valley conference to be held Friday at Parkside Hall in San Jose. See www.jointventure.org for details.)

I have an idea that there is a divergence of information which colors judgement on this topic:

"Probably the most important ingredient of a competitive region is the workforce," said Doug Henton, president of Collaborative Economics, which prepared the report for Joint Venture. "And we can either import our workforce, or we can train and support our own workforce to make sure everyone can participate. If all those pieces are in place, we can have a high-growth economy where everyone can participate."

But not everyone is so sure.

"The last 18 months have shown some progress for low-wage workers," said Stephen Levy, director of the Center for Continuing Study of the California Economy. "But the majority of gains have been at the upper end. My guess is that the gap is going to be widening. Is everyone going to be better off? I don't think that narrowing is going to be a long-term trend," said Levy, who also serves as an adviser for the annual index report.

Mike Curran, director of the North Valley Job Training Consortium, or NOVA, and also an adviser for the index report, said that beneath the relatively flat number of overall jobs there continues to be a lot of creation and destruction of jobs in Silicon Valley. Curran said not enough is being done to help people make the transition to the new types of jobs being created.

"Our public education system is not structured for people to come in and come out quickly," Curran said. "If they need to update their skills, it takes a long time."

I know about this situation personally. When I retrained to get my current job, it took me eighteen months of full-time schooling - and two years to be hired. Many of the excuses I got are repeated in this next paragraph:

Jay Thomas is vice president of Narus, a Mountain View telecommunications security company, which managed to survive the dot-com bust and has been able to resume hiring in recent years. The company now has about 100 employees, with the majority in Silicon Valley.

But when the company does have job openings, they tend to be at the higher end of skills and pay. So much so that the company sometimes has trouble finding people with the right skills. Because the company doesn't have the luxury of training people, it simply extends the search until it can find a qualified candidate who can hit the ground running.

Thomas, who is also a board member at NOVA, would like to see more invested in re-training so people can update and elevate their skills.

"It's a problem of matching the opportunities to people," Thomas said. "That all takes money. And when you have an economic downturn, money isn't always as free flowing. So it's almost a downward spiral."

That downward spiral is already evident, and is being pushed over the steep grade by the mandates of "No Education Tax Dollar Left Uncut":

[T]he region is not doing enough to prepare its young people for this creative economy. That's not new, but the latest evidence collected by Joint Venture, a civic group dedicated to improving the region's economy and quality of life, sends a message to the area's business, government and educational leaders: You must redouble your efforts to address the problem.

Consider, for instance, that only one-third of 10th- and 11th-graders were enrolled in intermediate algebra, a course that is an essential steppingstone to higher-level math and to a career in science or engineering. The rate of those taking the course has inched up since 2001, but remains alarmingly low -- and is even lower among Latinos and African-Americans.

One problem with this is that most teachers are humanities majors, not math or science majors. Those who are get better pay going into private industry. As a result, our kids aren't getting the best education possible because we don't want to pay the necessary taxes to increase salaries for math and science teachers - assuming there are any graduating. They don't seem to be getting into college in the first place:

[W]hile the percentage of high school graduates who meet requirements for entry into UC and CSU schools jumped to 46 percent, the overall graduation rate has dropped more than 10 percentage points to 74 percent. It suggests far too many of the area's youngsters will not benefit from the opportunities the region could afford them. And it points to a skills gap that could spell trouble for the valley's future economic vitality.

Now come the excuses to import talent rather than improve local conditions:

The deficit in homegrown skills has existed before, and it's part of the reason Silicon Valley imports such a large number of highly educated foreign nationals. These foreigners have been a vital asset to the valley's economy and now account for 53 percent of the engineers and scientists employed in the region's tech sector.

Now note the next excuse - the one I take Gates to task over:

[A]s opportunities increase in countries such as India and China, the pull that the valley has exerted on citizens of those nations could weaken, leaving the region with a skills deficit that is harder to patch.

At least the conclusion is looking in the correct direction:

Silicon Valley remains poised for continued success in a global economy that's increasingly fueled by intellectual capacity, ideas and creativity. Yet preserving that enviable position will require a determined push to give our young people the tools they need to succeed.

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